Excise duty default attracts penalty; pre-notice payment may reduce the quantum but does not wipe out liability.

Clearance of excisable goods without payment of duty attracted penalty under Rule 173Q of the Central Excise Rules, 1944, because duty had to be discharged in the prescribed manner and within the prescribed time. Payment of duty and interest before issue of the show cause notice was only a mitigating factor; it did not erase the default or eliminate penal liability. The lower appellate authority was therefore wrong to waive penalty altogether. The proper consequence was levy of penalty, with the pre-notice payment justifying reduction in quantum rather than full exoneration.

---

---

Issues: Whether penalty was leviable for clearance of excisable goods without payment of duty and whether payment of duty with interest before issuance of show cause notice justified waiver of penalty.

Analysis: The assessee was required to discharge duty in the manner and within the time prescribed under the excise law, and clearance of goods without paying duty attracted penal consequences. Payment of duty and interest before the show cause notice was treated as a mitigating circumstance, but it did not erase the default or make the levy of penalty unlawful. The lower appellate authority erred in waiving penalty altogether, though the pre-notice payment warranted imposition of a lesser penalty than the maximum.

Conclusion: Penalty was held leviable, and the assessee was entitled only to reduction in quantum, not total waiver.

Ratio Decidendi: Non-payment of excise duty at the prescribed time and manner attracts penalty under Rule 173Q of the Central Excise Rules, 1944, while subsequent payment before notice may reduce the penalty amount but does not negate liability.

---